How NOT To Start a Flower Delivery Business on Amazon...
After spending 6 months too and fro-ing with a flowers brand to help them improve their Amazon channel I got fed up with the indecision, and decided we could build something faster and better! So in July 2021 we set out to build Elliotts - a fresh flower gifting brand, exclusively on Amazon.
On paper it was a great idea but in reality it hasn't quite worked the way we expected and consequently we've decided to park business in it's current form while we explore a different direction for the brand.
This talks about what we’ve built to meet very specific challenges of Amazon in this category, the main headwinds we faced, and insights from building a business on the seller fulfilled prime model (SFP) - Trust that this will help businesses looking to sell flowers or operate an SFP business model on Amazon.
Despite knowing nothing about flowers, the opportunity stemmed from a few simple observations around the fresh flowers category on Amazon:
1. High Search Demand
Flowers was one of the highest evergreen demand products in the grocery category on Amazon that i've seen since 2020, and has stayed consistent into 2022 unlike some. Idea of volumes...
2. High Sales Volumes:
Competitors are achieving high monthly sales volumes consistently throughout the year, with of-course the seasonal spikes for Mothers Day, Valentines etc.
3. No clear "Brand" dominating the space
None of the incumbents have notable branded searches despite being listed for years - this suggested low repeat purchase and an opportunity to do it better…
Also the likes of Bloom & Wild don't go near Amazon, despite having a number of branded searches - we felt there was opportunity to offer a similar alternative, on Amazon.
Product listings were typically poor, and the delivered product (below is the bestseller on Amazon) made us feel there was opportunity to do it better.
Our Solution:
How we did it:
The below graphic demonstrates how the business model worked.
We learnt quickly how painful it is when flowers don’t get delivered on time or lost by a courier - they are a product that's dying after all!
The courier issues would always be out of our control, and we needed to focus on 3 key challenges:
Challenge 1 - Automation
To achieve Seller Fulfilled Prime status, you have to buy shipping through Amazon seller central, but also needed to communicate the order to our supplier in a format that they require. This meant to generate a gift card and SKU sheet which becomes the “order” in our suppliers world - but Amazon isn't flexible on this.
Shipstation or other software was not flexible enough for us, so we built our own software. Spending ~$15k to create a simple piece of software to convert Amazon orders & gift messages into printable A5 gift cards with custom designs.
We basically built moonpig for Amazon for $15k - quite cool! (you’d think this could be an amazing business on it’s own, however unfortunately the only buy shipping options are too expensive to be prime - one for the future though)
We hired a virtual assistant to process orders twice a day and send through to the supplier, who then make up the bouquets and hand over to couriers.
领英推荐
Challenge 2 - Amazon delivery promise
Conversion on Amazon is heavily influenced by delivery promise. Because we are seller fulfilled prime, Amazon calculates the delivery promise through an integration with the carrier eg. RM or DPD.
It was absolutely critical for us to show a next day promise, however often Amazon wouldn’t show it - often showing a day 2 or more days in the future.
Tomorrow Delivery promise vs. Specific Date Delivery Promise
Left: delivery promise is "by some date in future", but copy says next day...
Right: delivery promise is a date in the future, guaranteed by a certain time.
Of course these are different products, but the above ranks for flowers next day, so therefore it's a relevant alternative...
Because of the integration/relationship with Royal Mail on Amazon clearly not working well, our customers would often see an extended delivery promise, but that delivery promise from Amazon doesn't meet the search intent requirement of "next day".
Our customers were searching for next day flowers, but our delivery promise was showing a 2 day or longer delivery promise.
This meant our listing copy and the delivery promise don’t align, you create confusion, and your conversion rate plummets, then cost of advertising goes through the roof ??
The only solution to this was to use Amazon Shipping which would guarantee a next day delivery promise, and we know our main competitor was successfully using!
However, we needed to get to 200 units per day within 6 weeks of signing up. This just wasn’t going to be possible for a heap of reasons, but mainly because this would mean in 6 weeks we would need a 33% market share of flowers on Amazon, none least the supply challenges of ramping up that fast with a live product etc, box lead time etc.
We would need to commit inventory of boxes immediately, on a business that wasn't working, which wasn't sensible.
Challenge 3 - RRP competitiveness
Our business model was dropshipping from a flower fulfilment company (an awesome business partner - and I will happily refer people interested in this model).
This meant because we do not take any product risk in the flowers, we sacrifice potential margin.
However it’s great because we don’t need to worry about the buying, storing, packing orders etc. etc. We just focus on selling the bouquets!
We learnt that our competitors are higher up in the supply chain, more vertically integrated, thus able to sell at lower RRP for the same % margin. In an ideal world, our supplier would be the one selling DTC on Amazon to be most competitive.
The average price of the top 60 products on checking today was ￡26. Our average order value was ￡42 (we sold some nice bouquets at ￡60+ which no one could imagine on Amazon!). Meaning at 60% higher price point, it was going to be tough competition to out rank the lower cost alternatives.
Sure there was always the element of acquisition cost and brand building, but the unit economics were not stacking up due to the high cost of ads and low conversion (due to above delivery promise problem), which made the day to day painful.
The only solution would be to take on the risk of holding stock and fulfilling ourselves, but that was not the business we wanted to build in the structure we'd created.
The final nail in the coffin was the recent COGS rise. We saw our cost of bouquets rise ~16% while our boxes had increased ~30% since we first purchased in November 2021. This combined with our competitor price point not budging, we realised we were fighting a losing battle.
Summary
I’m a MASSIVE believer someone will enter this market and make it successful. With the right existing volume, structure, and Amazon shipping as a courier, there will be a brand doing ￡3m+ in flowers on Amazon in the next 3 years in the UK alone. We just aren't in the right place to make it happen.
I will happily talk to any Flower brands who might be considering Amazon as a method-to-market. We've learnt a lot over the last 18 months!
Positive outcomes:
Cheers for reading!
Head of Buying & NPD
2 年Refreshing to see such honesty in the challenges. I have no doubt it could be huge opportunity when the time is right
I will make you smile with my blooming lovely posts ??
2 年There are no failures, simply lots of learning which I’m sure you will put to good use in your next endeavour. It has been a pleasure to connect with you Elliott. The world of flowers is wonderful but there are many challenges!
Head of Operations @Babbasa · Founder @Stashbee · Expert in Residence @KCL Entrepreneurship Institute · Mentor @UP Collective
2 年Elliott congrats on everything you achieved and I've no doubt the lessons compound for next time. Thanks for sharing it with the rest of us!
Ensuring your marketing meets your business objectives & is value for money | Home Improvements Sector Specialist | Strategic Marketing Consultant | Chief Marketing Officer | Marketing Director
2 年Really interesting. Amazon is often touted as the answer to prayers, but the reality is anything but. Thanks for sharing.
Helping Senior Leaders transform their performance at work, fitness and health span. Ex-consultant turned coach who really understands the challenges of corporate life.
2 年Brilliant article Elliott Hawkins - great insight into the nuts and bolts behind an Amazon business, very impressive how you've broken it all down into really clear takeaways and learnings for everyone to benefit from ?? ??